The FTSE 100‘s rocketing as hopes of earnings-boosting interest rate cuts grow. With market confidence rapidly improving, London’s premier share index could be poised for further healthy gains in the days and weeks ahead.
“London’s blue-chip index has powered higher, as a relief wave cascaded over markets amid hopes for earlier interest rate cuts in the US,” analyst Susannah Streeter of Hargreaves Lansdown noted.
“The latest snapshot of the weakening labour market fired up stocks on Wall Street, and positive sentiment is washing over the FTSE 100, which passed the 8,200 mark for the first time” on Friday.
2 top FTSE stocks
Guessing how stock markets will move in the short term is difficult. But with inflation heading lower, and many UK shares looking dirt cheap, there’s a good chance the FTSE 100 will keep rising.
I think these two blue-chip stocks could be among the biggest gainers in the weeks and months ahead. Here’s why.
7%+ dividend yield
I think Aviva (LSE:AV.) shares could continue their recent ascent. The life insurance giant still looks dirt cheap, its shares trading on a forward price-to-earnings growth (PEG) ratio of 0.7. Any reading below 1 indicates that a stock is undervalued.
On top of this, a 7.4% dividend yield for 2024 could also continue to attract the attention of bargain hunters.
Higher-than-usual interest rates have dragged on profits across the financial services sector. This could remain a problem if inflationary pressures fail to recede from current levels.
But I believe Aviva has incredible opportunities to grow profits from here on. It’s a market leader in an industry that’s set to balloon in size as the number of older people in its territories soars.
Gross written premiums rose 13% last year, to £10.9bn. And the company’s accelerating investment in capital-light businesses to keep the momentum up.
Stunning cash generation provides it with the ammunition to meet its lofty ambitions too. Aviva’s Solvency II capital ratio was 207% as of December.
Shooting star
HSBC Holdings (LSE:HSBA) has been one of the FTSE’s most spectacular performers in recent weeks. Rising investor appetite has seen it break above 700p per share for the first time since 2018.
But on paper, HSBC shares still offers stunning value for money. Right now, they trade on a price-to-earnings (P/E) ratio of 7.1 times, while its PEG ratio stands at 0.9.
Meanwhile, HSBC offers a bulging 8.8% dividend yield. And its price-to-book (P/B) ratio is 0.9, indicating the bank’s trading below the value of its assets.
All of this could continue attracting significant interest from value investors.
HSBC’s profits are still in danger from turbulence in China’s economy. Recent forecast-beating figures from there suggest it could be turning the corner, although global tensions remain an issue for any Western business with major Chinese operations.
The long-term picture for HSBC is certainly encouraging though. Demand for financial products is tipped to soar from current low levels as wealth levels in China (and the broader Asian region) climb. This could underpin stunning long-term share price growth.
